Impact of the Withdrawal Mechanism on Competition and Managerial Performance of the Financial Industry

• Main Authors: Jin Ji Jeng, 鄭錦基
• Other Authors: Shiue Ren Shiu
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/80281299510089004031

碩士 === 元智大學 === 管理研究所 === 93 === Impact of the Withdrawal Mechanism on Competition and Managerial Performance of the Financial Industry Student：Jin Ji Jeng Professor：Shiue Ren Shiu Wen Jung Guo 　　　　　　　　　　　Graduate School of Management 　　　　　　　　　　　　　Yuan Ze University 　　　　　　　　　　　　　　　　　Abstract Since 1991, when the government lifted the ban, 16 new banks have been added; and since 2001, when the Financial Holding Act was passed, 14 financial holding companies have been incorporated. So far these financial establishments have been in operation for 13 and 3 years respectively. In a liberated environment, they prospered. The number of banks and branches has increased dramatically. Sharpened competition of the financial industry gave rise to a series of financial issues, and as a result following the first financial reform was completed the government started the second one. The consequent merging rush triggered the need for an exit mechanism. This research is based on literatures pertaining to merging and operational performances of financial institutions. It studies the 14 financial holding companies and their subsidiary banks in terms of 16 indicators such as profitability, growth, productivity, activity and stability. Comparing E Bank with its peers via the number of branches, capital adequacy ratio, asset return ratio, net return ratio, general excessive loan ratio and net profit ratio. The purpose is to delve into the performances of domestic financial institutions and their subsidiary banks, as well as the exit mechanism they trigger. Major conclusions of this study are as follows: 1.Financial holding companies are evaluated in terms of their financial statements between 2002 and 2004. The comparison may not be objective enough because many are in the red in various indicators during this period of time due to their attempt to wipe out bad debts. Cathay Holding topped the list in profitability and productivity, and Hua Nan Holding ranked number one in stability. First Holding is known for its ability to significantly cancel bad debts. China Development Holding appears to be struggling. It is observed that larger financial holding companies like Cathay and Mega outperform their peers in net profit ratio, share profit ratio, operational return ratio, shareholder’s equity return ratio and asset return ratio. 2.Subsidiary banks of financial holding companies are compared in terms of their financial statements between 1997 and 2004. Based on observation of long-term data, Taishin Bank leads the pack in profitability and activity. But runner-up China Development Bank has slowed down drastically owing to its effort to reduce bad debts in the last 3 years though its 1997-2001 performances were very impressive. Following the adjustment, however, its potential remains great. In the area of growth and productivity, new banks (such as Taishin Bank and Taipei-Fubon Bank) tend to outperform the old ones. Taipei-Fubon Bank comes in first in stability with older banks trailing behind, indicating the fact that new banks are more concerned about operational performances and financial structures. 3.As far as new banks are concerned: The overall performance of new banks that have formed financial holding companies is better than those that have not in terms of asset return ratio, shareholder’s equity return ratio, net profit ratio, excessive loan ratio, capital adequacy ratio and number of branches. Thanks to the exit mechanism, struggling banks (such as Chong Hsing Bank, Grand Bank and Ta-An Bank) have peacefully withdrawn from the market.